Expert Opinion: How Much Genuine Savings Do I Need?
One of the most frequently asked questions in the loan process is how much deposit do I need for a home loan. As a first home buyer, it’s helpful to know how much deposit you need to save for a home loan so you can get started with a savings plan. Minimum deposits vary between lenders and depend on the loan product you choose.
Due to changes over the years, it’s not just first home buyers who are questioning their deposit requirements. Prior to the Global Financial Crisis, 100 per cent loans were commonplace but post 2008 banks have tightened up and reduced their lending ratios. More recently however, lenders are chasing more business, which means there are new flexible options available.
As a general rule, if you are an owner occupier you will require a minimum 5 per cent of the purchase price as a deposit. If you are an investor, you will ideally require 5 to10 per cent of the purchase price.
Low deposit home loans can be great for first home buyers who haven’t been able to save a large deposit due to high rental payments and also for investors. If you are looking at a minimum deposit then you will also need to provide a proportion of the deposit as genuine savings. Genuine savings are those that have been held or accrued in a savings account for a minimum of three months. Some lenders will lend without genuine savings as long as you have stable employment however most mainstream lenders do require 5 per cent genuine savings.
Genuine savings can be evidenced by the following examples:
- A deposit or money saved in your bank account over 3 months without regular debit transactions
- Shares held for 3 months or more
- A clean rental history for 6 months or more, to be evidenced by a rental payment ledger from the managing real estate agent
- Making regular extra repayments into a personal loan over 6 months
- A term deposit held for more than 3 months
Each lender has their own credit policy and a variety of different options are now available on how they assess your deposit, so if you want to purchase a home but are unsure if it is feasible, you should talk to a Loan Market broker today about your options. It may not be as far off as you think!
Who is our expert?
Mark De Martino is the National Director of Sales for Loan Market. Having built a successful brokerage of his own, Mark is now passionate about helping other brokers build successful businesses.